Knowledge Of Rationality Research Articles

Nonspeculative bubbles revisited

In an important contribution, Lei et al. (2001, Econometrica) argue that speculation is not the driver of bubbles in the absence of common knowledge of rationality, suggesting a focus on mistakes and confusion. We revisit Lei et al.’s (2001) design, confirming the existence of bubbles. However, we argue that, although their design removes the ability to speculate, it introduces several unintended design artifacts. We discuss four possible behavioral implications of the design that may put upward pressure on transaction prices. The first is extreme initial asymmetric endowments. Second, cash to asset ratio increases with each transaction. Third, the combination of a high cash to asset ratio and removal of cash and assets from the market with each transaction impact perceived scarcity of assets more than cash. Lastly, actual scarcity of assets is present in these markets. We argue that these factors individually or in combination lead to the observed bubbles despite prohibiting speculative behavior.

Testing rational hypotheses in signaling games

We introduce a solution concept for signaling games, called Rational Hypothesis Testing Equilibrium (RHTE). Beliefs are updated via Ortoleva’s (2012) Hypothesis Testing model, allowing for conditioning on information sets off the path. Hypotheses are conjectures by the uninformed player about opponent’s strategies that rationalize sending an unexpected message. Each RHTE is a Perfect Bayesian Equilibrium, but not vice versa. RHTE features a number of desirable properties: First, beliefs are structurally consistent in the spirit of Kreps and Wilson (1982). Second, beliefs are consistent with mutual knowledge of rationality. Third, RHTE can be related to the prominent refinement concepts, including the Intuitive Criterion, strategic stability, and undefeated equilibrium. In the Spence game, RHTE restricts the admissible wages, significantly reducing the number of equilibria. Finally, we show that our equilibrium notion offers an alternative explanation for the experimental results in Brandts and Holt (1992, 1993).

POLITICAL CRITIQUE OF AXEL HONNETH'S RECOGNITION OF JURGEN HABERMAS' DELIBERATIVE DEMOCRACY

The purpose of this paper is to express Honneth's critique of Habermas' deliberative democracy. This research uses qualitative methods that are critically analytical in comparing the thoughts of Habermas and Honneth. The theory used is the sociology of knowledge from Karl Mannheim's. In the sociological theory of knowledge Mannheim says that man and his existence in the social environment can not be separated from his environment, a subjectivity that knows there is always interference from the social, political environment in which he lives. The results of this study reveal that the deliberative criticism of Democracy echoed by Habermas still leaves problems. The problem in deliberative democracies hints at rational communication, yet everyone does not have the same knowledge of rationality. For the educated person he has communication and knowledge rationally, but for the unlearned person does not have it, so they must represent his voice. In the Indonesian context, deliberative democracy is still wishful thinking. The public space referred to by Habermas has not yet gained a place in Indonesia, because the representation system that is the hallmark of representative democracy can be said to be pseudo-representation because there is no proportional bargaining position between constituents and their people's representatives. As Honneth's critique of Habermas the weakness of deliberative democracy, Honneth offers a form of intersubjective relation based on three areas of recognition namely love, self-confidence, self-respect, solidarity.

Social Rationalizability with Mediation

We propose a solution concept for social environments called social rationalizability with mediation that identifies the consequences of common knowledge of rationality and farsightedness. In a social environment several coalitions may and could be willing to move at the same time. Individuals not only hold conjectures about the behaviors of other individuals but also about how a mediator is going to solve conflicts of interest. The set of socially rationalizable outcomes with mediation is shown to be non-empty for all social environments, and it can be computed by an iterative reduction procedure. We show that social rationalizability with mediation does not necessarily satisfy coalitional rationality when the number of coalition members is greater than two.

Legitimisation of non-participation in adult education and training: the situational logic of decision-making

ABSTRACT The study deals with strategies for legitimising non-participation in adult education and training (AET) in groups of people with the lowest levels of participation: low-educated workers, retired individuals and people on parental leave. It aims to identify and describe strategies for legitimising non-participation. Results are based on extensive qualitative research focused on mapping the situational determinants of non-participation in AET. For this purpose, a total of 53 semi-structured interviews were conducted and analysed. Through generic coding procedure, four key strategies were identified: (1) commitment to lifelong learning; (2) preference of experience over theoretical knowledge; (3) preference of complete dedication and (4) mobilisation of past educational experience. Each group of adults has a distinct way of using the strategies to justify their non-participation. The findings contribute to our knowledge of situational rationality that is used in decision-making regarding participation in AET.

Dropping rational expectations

We consider a two-period pure-exchange economy, where uncertainty prevails and agents, possibly asymmetrically informed, exchange commodities and securities of all kinds. Consumers’ characteristics, anticipations, beliefs and actions are all private and typically not known nor assessed by the other agents. This setting drops rational expectations along the ‘common knowledge of rationality and market clearing’ (CKRMC) assumptions, and, in particular, it drops the Radner (1979) price model and price inference assumptions. Unaware agents are shown to face an incompressible uncertainty over future states and prices, represented by a so-called ”minimum uncertainty set”. A sequential equilibrium obtains when agents expect the ‘true’ price as a possible outcome on every spot market, and elect optimal market-clearing strategies. This so-called ”correct foresight equilibrium” (CFE) is shown to exist whenever agents’ anticipation sets include the minimum uncertainty set. When the CKRMC assumptions are restored, the CFE is shown to lead to an overarching concept of rational expectations equilibrium, which generalizes the classical concepts.

DETERMINANTS OF SELF MEDICATION RATIONALITY IN PHARMACY VISITORS

Background: As a developing country, Indonesia has a high prevalence of self-medication, with a potential risk ofirrationally using drugs. Meanwhile, factors such as educational level, economic status, age, gender, knowledge level affects the rationality of drug use. Therefore, this study aims to analyze the factors related to the rationality of self-medication in order to improve drug use rationality in Indonesia. Method: An observational analysis study was used with a cross-sectional design involving 193 pharmacy visitors. Furthermore, this study was conducted in April-May 2018, and data were collected through guided interviews and filling out questionnaires for socio-demographic data, level of self-medicated knowledge, and drug use rationality. Also, sampling was done by consecutive non-random sampling, and data analysis used SPSS V.21, Chi-square and Fisher statistical tests with a significance level of 0.05. Results : Out of the 193 subjects, 59.6% were aged 17-25 years, 59.1% were female, 62.7% had moderate education level, 50.3% had moderate levels of self-medicated knowledge, and 70.5% were rational drug users. Based on the chi-square and fisher test, it was found that gender, educational and knowledge levels were significantly related to treatment rationality with a value of p = 0.014, p = 0.000, and p = 0.000. Conclusion:There was a significant correlation between gender, educational level and level of self-medicated knowledge of the drug use rationality. Keywords: self-medication, rationality, drugs

Knowledge, Awareness and Probabilistic Beliefs

Abstract Bayesian game theory investigates strategic interaction of players with full awareness but incomplete information about their environment. We extend the analysis to players with incomplete awareness, who might not be able to reason about all contingencies in the first place. We develop three logical systems for knowledge, probabilistic beliefs and awareness, and characterize their axiom systems. Bayesian equilibrium is extended to games with incomplete awareness and we show that it is consistent with common prior and speculative trade, when common knowledge of rationality is violated.

An epistemic characterization of MACA

Dekel et al. (J Econ Theory 89 (1999) 165-185) offered a solution concept of “rationalizable self-confirming equilibrium (RSCE)” as the steady state where rational individuals observe the played actions and use the information about opponents’ payoffs in forming the beliefs about opponents’ behavior off the equilibrium path. In this paper we investigate epistemic conditions for RSCE from a decision-theoretic point of view. Within a standard semantic framework, we formulate and show, by using the notion of “conditional probability system (CPS),” that RSCE is the logical consequence of common knowledge of rationality and mutual knowledge of the actions along the path of play. In this paper, we also apply this epistemic approach to other related solution concepts such that self-confirming equilibrium (SCE) and sequential rationalizable self-confirming equilibrium (SRSCE).

Agreeing to Disagree Politically

ABSTRACT Aumann's agreement theorem and subsequent work shows that people who are rational in a certain Bayesian sense cannot agree to disagree on matters of fact. This result hinges on a type of epistemic impartiality: a rational person will not give extra weight to a piece of evidence simply because they themselves discovered it rather than someone else. We extend this argument by questioning the possibility of reasonable political disagreement for political liberals. On our reading, a “Good Liberal” must not give extra weight in public deliberations to their own preferences or values simply because they are their own. This political impartiality mirrors the epistemic impartiality of Aumann's theorem and we argue that disagreement on policy is impossible in a world of “Good Liberal Bayesians,” assuming common knowledge of both Bayesian rationality and Liberal reasonableness. The persistence and predictability of disagreement in the real world provides support for expressive accounts of political behaviour and points to the important role of epistemic trust in politics. This issue of epistemic trust provides insight into recent trends in political polarization in the United States and elsewhere.

Perfect Prediction in normal form: Superrational thinking extended to non-symmetric games

This paper introduces a new solution concept for non-cooperative games in normal form with no ties and pure strategies: the Perfectly Transparent Equilibrium. The players are rational in all possible worlds and know each other’s strategies in all possible worlds — which, together, we refer to as Perfect Prediction. The anticipation of a player’s decision by their opponents is counterfactually dependent on the decision, unlike in Nash Equilibria where the decisions are made independently. The equilibrium, when it exists, is unique and is Pareto optimal.This equilibrium is the normal-form counterpart of the Perfect Prediction Equilibrium; the prediction happens “in another room” rather than in the past. The equilibrium can also be seen as a natural extension of Hofstadter’s superrationality to non-symmetric games. Algorithmically, an iterated elimination of non-individually-rational strategy profiles is performed until at most one remains. An equilibrium is a strategy profile that is immune against knowledge of strategies in all possible worlds and rationality in all possible worlds, a stronger concept than common knowledge of rationality but also stronger than common counterfactual belief of rationality.We formalize and contrast the Non-Nashian Decision Theory paradigm, common to this and several other papers, with Causal Decision Theory and Evidential Decision Theory. We define the Perfectly Transparent Equilibrium algorithmically and prove (when it exists) that it is unique, that it is Pareto-optimal, and that it coincides with Hofstadter’s Superrationality on symmetric games. We relate the finding to concepts found in the literature such as Individual Rationality, Rationalizability, Minimax-Rationalizability, Second-Order Nash Equilibria, the Program Equilibrium, the Perfect Prediction Equilibrium, Shiffrin’s Joint-Selfish-Rational Equilibrium, the Stalnaker–Bonanno Equilibrium, the Perfect Cooperation Equilibrium, the Translucent Equilibrium, the Correlated Equilibrium, and Quantum Games. Finally, we specifically discuss inclusion relationships on the special case of symmetric games between Individual Rationality, Minimax-Rationalizability, Superrationality, and the Perfectly Transparent Equilibrium, and contrast them with asymmetric games.

Disagreement Under Almost Common Knowledge of Rationality

Two agents sincerely exchange their best guesses about the state of the world infinitely many times. When each agent places a small positive probability on the event that her opponent is of some finite level of reasoning and initial disagreement is large enough (that is, private signals are strong and different), permanent and large disagreement is possible even for infinitely sophisticated agents.

Dominance rationality: A unified approach

There are four types of dominance depending on whether domination is strict or weak and whether the dominating strategy is pure or mixed. Letting d vary over these four types of dominance, we say that a player is d-dominance rational when she does not play a strategy that is d-dominated relative to what she knows. For weak dominance by a mixed strategy, Stalnaker (1994) introduced a process of iterative maximal elimination of certain profiles that we call here flaws. We define here, analogously, d-flaws for each type of dominance d, and show that for each d, iterative elimination of d-flaws is order independent. We then show that the characterization of common knowledge of d-dominance rationality is the same for each d. A strategy profile can be played when d-dominance rationality is commonly known if and only if it survives an iterative elimination of d-flaws.

No trade and yes trade theorems for heterogeneous priors

We show that contrary to currently widely-held misperceptions, the classical no trade theorem obtains even under heterogeneous priors. That is, when priors are not common, speculative trade is still impossible under common knowledge of rationality. However, trade becomes mutually acceptable if at least one party to the trade puts at least some slight probability on the other party being irrational. We also derive bounds on disagreements in the case of heterogeneous priors and common p-beliefs.

Agreeing to Disagree Politically

Robert Aumann's agreement theorem and subsequent work shows that people who are rational in a certain Bayesian sense cannot agree to disagree on matters of fact, as long as there is common knowledge of this common rationality. This result hinges on a type of epistemic impartiality: a rational person will not give extra weight to a piece of evidence simply because they themselves discovered it rather than someone else. Of course, Good Bayesians who agree on matters of fact can nevertheless disagree due to differences of preference and value. We question the possibility of reasonable political disagreement for liberals. On our reading, a “Good Liberal” must not give extra weight in public deliberations to their own preferences or values simply because they are their own. This political impartiality mirrors the epistemic impartiality of Aumann's theorem and we argue that disagreement on policy is impossible in a world of Good Liberal Bayesians, assuming common knowledge of both Bayesian rationality and Liberal reasonableness. The persistence of disagreement in the real world provides support for expressive accounts of political behaviour and points to the important role of epistemic trust in politics.

Strategies under Strategic Uncertainty

I investigate the decision problem of a player in a game of incomplete information who faces uncertainty about the other players' strategies. I propose a new decision criterion which works in two steps. First, I assume common knowledge of rationality and eliminate all strategies which are not rationalizable. Second, I apply the maximin expected utility criterion. Using this decision criterion, one can derive predictions about outcomes and recommendations for players facing strategic uncertainty. A bidder following this decision criterion in a first-price auction expects all other bidders to bid their highest rationalizable bid given their valuation. As a consequence, the bidder never expects to win against an equal or higher type and resorts to win against lower types with certainty.

Relation of knowledge and level of education to the rationality of self-medication on childhood diarrhea on the Code River banks in Jogoyudan, Jetis, Yogyakarta

Self-medication as an alternative is used to reduce the severity of diarrhea. Optimal treatment can be done by increasing the rationalization of self-medication on diarrhea. This can be achieved with good knowledge about self-medication, which is in turn influenced by level of education. The aim of this study was to determine the relationship of knowledge and education level to rationality of self-medication on childhood diarrhea around the Code River in Jogoyudan, Jetis, Yogyakarta. The study was conducted by cross-sectional analytical observational design. The subjects were mothers who had children aged 2-11 years who had experienced diarrhea and had self-medication. Questionnaires were used to assess the rationality of self-medication on children's diarrhea by the parents. The respondents were askeds to fill out about indications, right drugs, doses, time intervals and periods of drug administration. Data were analyzed using chi- square. It was showed that of 40 respondents, 14 respondents (35%) performed rational self-medication on children's diarrhea and 26 respondents (65%). did not rationalize the treatment. The results of a bivariate test obtained a chi-square value of 9.808 (> 3.841) and a p value of 0.002 (<0.05) on the relationship between education level and rationality of self-medication and a chi-square value of 19.476 (> 3.841) and a p value of 0.000 (<0.05) on relationship between knowledge and rationality of self- medication. The conclusion of this study is that there is a correlation between knowledge and level of education and rationality of self-medication on childhood diarrhea on the Code River banks in Jogoyudan, Jetis, Yogyakarta.

The Soritical Centipede

AbstractTwo philosophical questions arise about rationality in centipede games that are logically prior to attempts to apply the formal tools of game theory to this topic. First, given that the players have common knowledge of mutual rationality and common knowledge that they are each motivated solely to maximize their own profits, is there a backwards‐induction argument that (i) employs only familiar non‐technical concepts about rationality, (ii) leads to the conclusion that the first player is rationally obligated to end the game at the first step, (iii) is deductively valid, (iv) employs premises all of which are prima facie highly plausible, and (v) is prima facie sound (in virtue of features (iii) and (iv))? Second, if there is such an argument, then is it actually sound, or is it instead defective somehow despite being prima facie sound? Addressing these two questions is our project. We present a backwards‐induction argument that is prima facie sound; we argue that it is an instance of the notorious sorites paradox, and hence that the concepts of rational obligatoriness and rational permissibility are vague; and we briefly address the potential consequences of all this for the foundations of game theory and decision theory.

Bounded rationality and correlated equilibria

We study an interactive framework that explicitly allows for non-rational behavior. We do not place any restrictions on how players can deviate from rational behavior. Instead we assume that there exists a lower bound p2 [0; 1] such that all players play and are believed to play rationally with a probability p or more. This, together with the assumption of a common prior, leads to what we call the set of p-rational outcomes, which we dene and characterize for arbitrary p2 [0; 1]. We then show that this set varies continuously in p and converges to the set of correlated equilibria as p approaches 1, thus establishing robustness of the correlated equilibrium concept to relaxing rationality and common knowledge of rationality. Thep-rational outcomes are easy to compute, also for games of incomplete information, and they can be applied to observed frequencies of play to compute a measure p that bounds from below the probability with which any given player is choosing actions consistent with payo maximization and common knowledge of payo maximization.

Pre-play communication with forgone costly messages: experimental evidence on forward induction

We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens in Econometrica 54: 1003–1037, 1986; Govindan and Wilson in Econometrica 77: 1–28, 2009), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.